Once before in his entrepreneurial career, Glen Tullman was standing at the threshold when technology transformed an industry. In the '90s, he helped figure out a system that allowed insurance claims to be recorded and processed on computers, not paper. It made him a bundle.

Now Tullman heads Allscripts Healthcare Solutions, which sells a product that lets doctors run a paperless medical practice--including booking appointments online and creating e-prescriptions and, most important, collecting X rays, lab results and medical histories in one database, accessible to physicians and patients. He thinks he's on the doorstep of another transformation. "There is less penetration of information technology in health care than any other major industry," says Tullman. "Someone has said the advent of electronic health records will be as significant as the discovery of penicillin."

It's medicine that the health-care system needs desperately. Backed by the Bush Administration, prodded by employers and under pressure to contain costs and improve service, the medical community is finally--and rapidly--plugging into the new world of electronic health records, in which your personal health information shows up wherever you do--at your doctor's office, the emergency room, the MRI machine, even your home. "Resistance is at an all-time low," says Neal Patterson, CEO of Cerner, an e-health company based in Kansas City, Mo. Cerner and Allscripts are racking up quarter after quarter of double-digit sales growth.

Underscoring the new urgency to shift to e-health was the joint press conference held in Washington last week by Senators Hillary Clinton and Bill Frist, two potential presidential candidates who otherwise rarely get near enough to pass a communicable disease. They've got together, however, to introduce legislation that would provide seed money for local health networks and eliminate the biggest hurdle to beaming medical records to where they are needed: the lack of interoperability among the myriad systems now in use. Medical record keeping in the U.S. is in the "Dark Ages," Clinton complained. "We need to have the information easily accessible."

The U.S. government is leading this charge into the medical information age--robustly and, by most accounts, effectively--because it pays 46% of the nation's medical bills. Dr. Mark McClellan, former head of the FDA and now director of the Centers for Medicare and Medicaid Services, is making paperless medicine mandatory for physicians who want to participate in the agency's potentially remunerative pay-for-performance scheme. The aim, sensibly enough, is to pay doctors for keeping their patients healthy, as opposed to the current fee-for-service basis that simply rewards patient throughput. A priority for McClellan is to improve the treatment of diabetes and other chronic diseases, which absorb a disproportionate amount of health-care dollars. That requires better data collection--uploading and monitoring information from glucose meters, for instance--and more communication with patients.

"McClellan has made it clear. They are not going to pay the same whether you leave horizontal or vertical," says Dr. Don Rucker, head medical officer of Siemens Medical Solutions, one of a handful of large corporations, including IBM and General Electric, that are betting billions on the market for health-information technology.